News

Destruction that is creating a better America

American Account

GENERAL MOTORS, which like Ford lost $1.3 billion (£755m) in the third quarter, will lay off 30,000 workers and close or downsize 12 plants in a desperate effort to avoid bankruptcy. Kodak is frantically trying to build its digital business as the use of film declines. Knight Ridder shops for a buyer as the collapse of its local newspaper monopolies destroys its viability.

Several airlines have declared bankruptcy as their uneconomic cost structures cripple their ability to compete. Telecoms companies watch the value of their wires drop as mobile phones, voice-over-internet and cable companies poach their customers. Blockbuster flirts with bankruptcy as new, more convenient ways of delivering films to the screens of couch potatoes make a trip to the rental shop unnecessary.

That destruction of the value of existing assets and businesses is, fortunately, only half the story. The other half was long ago pointed out by Joseph Schumpeter.